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CNBC's American Greed Ponzi Schemers
Old 09-17-2013, 06:00 PM   #1
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CNBC's American Greed Ponzi Schemers

Every other one of these shows I watch seems to involve an investment fund / Ponzi scheme and I'm dumbfounded at how many people think earning 20%+ per year on their investment is reasonable. As someone posted in another thread regarding the show, I don't know who is more greedy - the thief or the victim.

I'm amazed at how big these funds get with what appears to be very little oversight. Can basically anyone start collecting funds and investing them on behalf of others? I always assumed to be an investment advisor or money manager you had to have some type of credentials or license but I have never heard that being raised as an issue when these frauds are discovered; at least the shows don't indicate it as being an issue.
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Old 09-18-2013, 12:31 AM   #2
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I haven't seen the show.

I believe that one is required to have a securities license if one is collecting funds from and investing them on someone else's behalf.

It might not make much of a show if everyone is charged with that violation, perhaps?

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Old 09-18-2013, 07:38 AM   #3
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They are very common where I live. A lot of affinity fraud-mostly with church groups. Usually the scam involves either FX trading or real estate trusts.

Selling Iraqi dinars is also making it's way around churches in our area...for the second or third time. Some people are literally buying boxes of the stuff.

It is amazing to me how some people will invest their life savings, mortgage their homes, or take out HELOCS on the promise of 20-60 percent returns, or more. Often on the advice of a friend or a friend whose cousin's uncle thinks it is sound....without doing any verification
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Old 09-18-2013, 07:43 AM   #4
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Originally Posted by Snidely Whiplash View Post
Every other one of these shows I watch seems to involve an investment fund / Ponzi scheme and I'm dumbfounded at how many people think earning 20%+ per year on their investment is reasonable. As someone posted in another thread regarding the show, I don't know who is more greedy - the thief or the victim.

I'm amazed at how big these funds get with what appears to be very little oversight. Can basically anyone start collecting funds and investing them on behalf of others? I always assumed to be an investment advisor or money manager you had to have some type of credentials or license but I have never heard that being raised as an issue when these frauds are discovered; at least the shows don't indicate it as being an issue.
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Most of these Ponzi schemes begin the same way - the fraudster gets someone, often a friend or acquaintance or friend-of-a-friend to invest a relatively small amount while receiving some surreally high return such as 20% per month for a few months. Once the investor/victim gets hooked, we then hear how he or she mortgaged his house or cashed in his IRA to generate $200k or $300k (or more) to add to his or her initial investment. It is at that point I groan and say to the TV, "NOOOOOO....you are going to lose your house/IRA/nest egg."

A few months later, the nice, fat dividend checks disappear, phone calls do not get returned, the office gets closed, the Ponzi schemer can't be found............and that person's life has been ruined. No more IRA, the house will get foreclosed. The fraudster may or may not get caught, go to trial, say how "sorry" he was, maybe take a plea deal, go to jail (if he did not commit suicide or fake THAT)......but the money is either gone (spent) or never be found (or only a tiny fraction of it gets found).
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Old 09-18-2013, 07:58 AM   #5
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It's not hard to start an investment scheme without registering as an advisor. You just start soliciting money. You can go on as long as you're not caught.

And the chances of being caught seem to be slim. Just ask Bernie Madoff, who never registered as an investment advisor.
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Old 09-18-2013, 10:37 AM   #6
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Most of these Ponzi schemes begin the same way - the fraudster gets someone, often a friend or acquaintance or friend-of-a-friend to invest a relatively small amount while receiving some surreally high return such as 20% per month for a few months. Once the investor/victim gets hooked, we then hear how he or she mortgaged his house or cashed in his IRA to generate $200k or $300k (or more) to add to his or her initial investment. It is at that point I groan and say to the TV, "NOOOOOO....you are going to lose your house/IRA/nest egg."

A few months later, the nice, fat dividend checks disappear, phone calls do not get returned, the office gets closed, the Ponzi schemer can't be found............and that person's life has been ruined. No more IRA, the house will get foreclosed. The fraudster may or may not get caught, go to trial, say how "sorry" he was, maybe take a plea deal, go to jail (if he did not commit suicide or fake THAT)......but the money is either gone (spent) or never be found (or only a tiny fraction of it gets found).
Hey Scrabbler, you just ruined the plot line for every American Greed show for anyone who hasn't watched it! Same song, different verse, but I still enjoy watching the show. Either I am sadistic or it makes me feel smarter than some people. I haven't figured that part out yet.
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Old 09-18-2013, 11:49 AM   #7
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I love this show! From what I see, most of these guys don't have any license; just a lot of chutzpah... they collect money from folks and develop a following and create a 'fund'.

We winter in the Lauderdale area and a we know where a few of the homes/mansions of these crooks are. I find some weird comfort in knowing that despite the apparent wealth, things aren't often as they appear...they don't really own that $10M mansion/yacht; they're just a few weeks away from the FBI banging down their door.

Always feel sorry for the victims, but, as noted, naivete+greed is a dangerous mix.

Re: Madoff, the genius behind his scam (IIRC) was that he didn't offer huge gains, just slightly above average but very consistently. He had been a well known SEC regulator and all the pedigree of being a solid guy. You had to beg to join his fund!
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Old 09-18-2013, 01:55 PM   #8
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I love this show! From what I see, most of these guys don't have any license; just a lot of chutzpah... they collect money from folks and develop a following and create a 'fund'.

We winter in the Lauderdale area and a we know where a few of the homes/mansions of these crooks are. I find some weird comfort in knowing that despite the apparent wealth, things aren't often as they appear...they don't really own that $10M mansion/yacht; they're just a few weeks away from the FBI banging down their door.

Always feel sorry for the victims, but, as noted, naivete+greed is a dangerous mix.

Re: Madoff, the genius behind his scam (IIRC) was that he didn't offer huge gains, just slightly above average but very consistently. He had been a well known SEC regulator and all the pedigree of being a solid guy. You had to beg to join his fund!
Yep, I have seen quite a few of the episodes. I have never once on the show heard the term "Boglehead" and "victim" in the same sentence.
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Old 09-18-2013, 02:20 PM   #9
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Yep, I have seen quite a few of the episodes. I have never once on the show heard the term "Boglehead" and "victim" in the same sentence.
What you DO hear is "...entire life savings..." which 'boggles'!

How anyone would hand over their entire wealth to some guy they met at church/a party defies any logic. If I"m going to trust anyone with any sizable amount of money it would be a nationally known, long term firm aka Vanguard, Fido, TRPrice etc....not 'some guy'.
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Old 09-18-2013, 02:34 PM   #10
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What you DO hear is "...entire life savings..." which 'boggles'!

How anyone would hand over their entire wealth to some guy they met at church/a party defies any logic. If I"m going to trust anyone with any sizable amount of money it would be a nationally known, long term firm aka Vanguard, Fido, TRPrice etc....not 'some guy'.
It always revolves around the "cult of personality" doesn't it. The part that infuriates me is the prison sentences. Many of them are 5-20 years and who knows if they get out early for good behavior. Yet many people have their entire lives destroyed essentially until they die. Maybe it's just me and I need to live in Saudi Arabia or something, but these scoundrels need a good severe public beating and then lock the iron doors behind them after the beating until these people get their money back(so I guess that means a life sentence for most of them). I have seen some episodes where they get out of jail and then get caught again.
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Old 09-18-2013, 02:42 PM   #11
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This show is a total guilty pleasure. Scary though, I have seen members of my own family be taken in by much lower level scams (work from home, special deal clubs for thousands up front).
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Old 09-18-2013, 04:03 PM   #12
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It always revolves around the "cult of personality" doesn't it. The part that infuriates me is the prison sentences. Many of them are 5-20 years and who knows if they get out early for good behavior. Yet many people have their entire lives destroyed essentially until they die. Maybe it's just me and I need to live in Saudi Arabia or something, but these scoundrels need a good severe public beating and then lock the iron doors behind them after the beating until these people get their money back(so I guess that means a life sentence for most of them).
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Sounds like a plan to me.

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Old 09-18-2013, 04:29 PM   #13
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+1
Sounds like a plan to me.

Cheers!
Glad to know I am not the only extremist here.
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Old 09-20-2013, 10:22 AM   #14
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I'm dumbfounded at how many people think earning 20%+ per year on their investment is reasonable.
I think its a desire for immediate gratification as opposed to applying work\effort\patience over numerous years to get a result. Everywhere you look someone is winning a huge lottery, getting a large lawsuit payout, signing a golden 4 year pro-sports contract extension etc. Those people get lots of media attention and it looks so fun to be those people - to buy those things. This is their chance to have a part of that

Not to much talk about what happens to those people once they blow through the money stack or how few people actually have that happen to them. Thats not exciting, sexy or something we want to fantasize about.
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Old 09-20-2013, 10:27 PM   #15
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Where we live, you get more prison time, with less chance of parole, by stealing $300. From 7/11 than you do from stealing 50 million from the life savings of 200 people. To figure

I guess the rule of thumb is to go big or go home....and do not forget to dress and play the part.
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Old 09-21-2013, 10:31 AM   #16
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It always revolves around the "cult of personality" doesn't it. The part that infuriates me is the prison sentences. Many of them are 5-20 years and who knows if they get out early for good behavior. Yet many people have their entire lives destroyed essentially until they die. Maybe it's just me and I need to live in Saudi Arabia or something, but these scoundrels need a good severe public beating and then lock the iron doors behind them after the beating until these people get their money back(so I guess that means a life sentence for most of them). I have seen some episodes where they get out of jail and then get caught again.

Good one Mulligan! It's not just men. When my FIL was alive, you would be surprised at the women who came over for a "loan!" Of course, they were dressed to the nines. One managed to "borrow" over $100,000 (unsecured) and then declared bankruptcy. She did this to other elders too. She only received a couple of years in jail, last I heard....
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Old 09-21-2013, 12:51 PM   #17
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Good one Mulligan! It's not just men. When my FIL was alive, you would be surprised at the women who came over for a "loan!" Of course, they were dressed to the nines. One managed to "borrow" over $100,000 (unsecured) and then declared bankruptcy. She did this to other elders too. She only received a couple of years in jail, last I heard....
Yes, the prison terms of some of these cases mystifies me, and emboldens the criminals doing them. Like another poster said, rob a 7-11 and you could face a more severe penalty. Just read in the paper today about an "honorable thief". Seems he may have skimmed a couple million from the public coffers. An audit found it, they locked his passwords out, and told him they needed to meet the next day over the situation. Well seems that he didn't make the appointment because he committed suicide before the meeting was held. Paper mentioned he had declared bankruptcy just a few years ago, made a salary of about 80k, but lived in an almost 1.5 million home purchased by himself. No sympathy anywhere from me, oh wait yes I do...the tax payers who got swindled out of all that money.
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Old 09-21-2013, 02:10 PM   #18
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I watch this show and enjoy it (despite the obvious arc to the plot). But I recently met a really lovely woman whose life is being destroyed because her husband invested with one of these major ponzi schemes (a topic of one episode in fact). They now have their house up for sale and the husband is back working.

The crazy thing is that they lost money in the scheme, but the real hardship came from the judge insisting that they should pay up even more because he didn't lose as much as the others; he came in towards the end when the offers were intense because the ship was sinking no doubt. The judge said basically that he "should have known better that 20% return was an indication of a ponzi scheme". I haven't met the husband, but do feel sorry for her.
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Old 09-21-2013, 02:19 PM   #19
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